Iger: Disney Has Smoother Path Than Comcast Closing Fox Acquisition

NEWS ANALYSIS — When it comes to mega corporate mergers, regulatory muster is just as important as money.

Speaking (along with CFO Christine McCarthy) June 20 on the analysts call to discuss Disney’s enhanced $71.3 billion offer for 20th Century Fox Film, CEO Bob Iger said he believes his company has more insight with federal regulators than rival Comcast, which has a competing $61 billion offer on the table for Fox and British satellite TV operator Sky Plc., among other assets.

“We have a much better opportunity in terms of approval and the timing of that approval than Comcast does in this case,” said Iger. “We are confident that we have a clear and timely path to approval.”

Iger cites the six months already invested by Disney with Fox involving the media company’s initial $52 billion bid for the Rupert Murdoch-owned media giant. He also downplayed Comcast’s concerns that control of entertainment content was at the heart of government’s failed antitrust lawsuit in the recently completed AT&T/Time Warner deal.

“It’s simply an apples to oranges comparison to what the Justice Department was considering when considering the AT&T acquisition of Time Warner,” Iger said. “We have a much greater appreciation for the potential that these assets represent to us, to our strategy today and to the strategy we intend to deploy long-term. We’ve been extremely impressed with the talent we’ve been engaging with at Fox.”

Iger said internal management changes (upping Kevin Mayer and Bob Chapek’s duties) at Disney were done in part to absorb Fox and Sky — the latter Europe’s largest satellite operator with more than 10 million subscribers — while greenlighting over-the-top video initiatives.

“Direct-to-consumer distribution has become an even more compelling proposition in the six months since we announced the [initial Fox] deal,” Iger said. “Clearly the consumer is voting, loudly, that these new platforms are very compelling from a consumer experience and consumer value perspective.”

CFO McCarthy projects $2 billion in cost synergies (i.e. job cuts) and lower debt with the transactions by 2021.

“We’re very comfortable with this level of [debt-to-earnings] leverage,” said McCarthy. “We’ve always said we would be willing to deploy our balance sheet to advance our strategic objectives.”

 

U.K. Cultural Secretary Ups Sky Ownership Requirements, Including $2 Billion Fiscal Support

Owning British satellite TV operator Sky Plc just got a lot more expensive.

The British government June 19 laid out additional requirements to the ongoing £15 billion equity stake sale of Sky to 21stCentury Fox, which is turn is being coveted by The Walt Disney Co. and Comcast in separate acquisition bids.

At issue is the financial and editorial independence of Sky News, one of the largest news channels in the United Kingdom.

Matt Hancock, U.K. Cultural Secretary, disclosed that Disney had agreed to operate and maintain an editorially independent Sky News branded news service for 15 years rather than 10 years. It also agreed to not sell Sky News for 15 years without the consent of the government.

Disney and Fox also agreed to increase annual Sky News funding by £100 million ($132 million) – which amounts to nearly $2 billion over the course of the agreement.

“In my view, these revised undertakings meet the criteria that I set out to the House on 5 June and will help to ensure that Sky News remains financially viable over the long term; is able to operate as a major UK-based news provider; and is able to take its editorial decisions independently, free from any potential outside influence,” Hancock said in a statement.

Public input on the proposed merger is open until July 4.

Comcast Offers $65 Billion for Fox

Comcast Corp. has submitted a $65 billion cash bid for 21st Century Fox film and television assets,  a day after a federal judge dismissed competitive concerns and ruled that AT&T’s $85 billion acquisition of Time Warner may proceed.

Comcast’s bid is significantly higher than Walt Disney Co.’s $52.4 billion offer. However, a key difference between the offers is that Disney’s involved a stock swap that would give the Fox shareholders about a 25% stake in Disney going forward. Rupert Murdoch, chairman of 21st Century Fox, reportedly favored the stock transaction over Comcast’s one-time buyout offer because it limits tax liabilities in the short term, in addition to the potential for future earnings on the stock.

In a letter to the Fox board, Comcast Chairman and Chief Executive Brian Roberts said, “We are also highly confident that our proposed transaction will obtain all necessary regulatory approvals in a timely manner and that our transaction is as or more likely to receive regulatory approval than the Disney transaction.”

Comcast already owns NBC Universal. The telecom last month said it planned to make an all-cash offer for the Fox studio and networks, but would wait until a court ruling on the AT&T-Time Warner merger.

Philadelphia-based Comcast also said it would pay Disney the $1.525 billion  fee owed in the event of its Fox deal falling through.

Fox shareholders are slated to vote July 10 on the Disney merger, but Comcast said it wants a deal before that.

Fox assets that are on the table include the 20th Century Fox movie and TV studios, as well as the FX and National Geographic channels; Fox’s 22 regional sports networks; its interests in U.K. satellite TV and Internet provider Sky; and a one-third stake in Hulu, which is currently owned by Comcast, Disney and Fox, each with a 30% interest.

A Disney acquisition of Fox would also return the movie and distribution rights to films based on properties Disney now owns, such as Marvel Comics’ X-Men and Fantastic Four, paving the way for their inclusion in Disney’s lucrative Marvel Cinematic Universe. Fox also owns the perpetual distribution rights to the original Star Wars. In addition, Disney recently expanded its Florida-based Animal Kingdom theme park to include a themed-area based on James Cameron’s “Avatar” franchise, which is Fox IP.

Industry observers expect Disney to make a counter-offer for the Fox assets, which could involve an updated bid that includes a mix of stock and cash.

Dish Network Owner Eyeing U.K. Satellite TV Market?

NEWS ANALYSIS — On the heels of 21st Century Fox, the Walt Disney Co. and Comcast collectively coveting U.K. satellite TV operator Sky, Denver-based EchoStar Corp. is also gazing across the pond.

Headed by Charlie Ergen, majority owner of Dish Network, EchoStar reportedly made an offer for Inmarsat, a London-based satellite telecommunications company with more than $1.4 billion in revenue in 2017.

While Inmarsat’s stock price jumped 14% following the undisclosed financial offer, the company considered it below its market value and rejected it.

“It very significantly undervalued Inmarsat and its stand-alone prospects,” the company said in a June 8 statement. “The board remains highly confident in the independent strategy and prospects of Inmarsat.”

Unlike Disney, Fox and Comcast’s interests in Sky’s 10 million pay-TV subscribers, Ergen is more interested in Inmarsat’s radio spectrum portfolio.

As media distribution increasingly becomes wireless, spectrum plays a key role in how that distribution channel works. Most major industries rely on wireless technologies that depend on spectrum access to function, including cellular, broadcast and satellite.

In the United States, regulatory responsibility for the radio spectrum is divided between the Federal Communications Commission (FCC), and the National Telecommunications and Information Administration (NTIA).

In 2017, Ergen reportedly spent $6.2 billion acquiring spectrum rights in government auctions – second only to T-Mobile. Dish reportedly owns about $35 billion worth of spectrum rights in the U.S., despite not yet operating a wireless network – as do Verizon, AT&T, T-Mobile, Sprint and Comcast.

Cellular distribution was one of the reasons Dish acquired the bankrupt Blockbuster Video chain in 2011. It had hoped to use the video store’s retail footprint to jumpstart branded and third-party mobile devices. That strategy stalled in 2013 when Dish shuttered the remaining Blockbuster-owned stores.

In 2015, Dish Launched Sling TV, the industry’s first online TV service. With more than 2 million subscribers, Sling TV represents Dish’s future as traditional linear TV declines.

With AT&T launching DirecTV Now, Charter operating Spectrum TV Plus, and Disney bowing ESPN+, Ergen has voiced interest in launching a wireless network by 2020 to better accommodate Sling TV to mobile consumers.

A year ago, Comcast did just that bowing Xfinity Mobile – a wireless service targeting the cabler’s 25 million broadband subscribers.

“Wireless is hyper competitive,” Dave Watson, CEO of Comcast Cable, said last year.“We will measure our success very differently than other wireless carriers. It will be designed to support the core cable business.”

Indeed, Ergen has similar designs involving Dish Network, and could license his spectrum portfolio or use it as leverage to entice merger and acquisition offers from third parties. Last December, Ergen stepped down as CEO of Dish to focus on wireless. Maybe that will include revisiting the Inmarsat offer.

U.K. Government Approves Fox, Comcast’s Competing Sky Bids

The British government June 5 officially removed regulatory objections to 21st Century Fox’s $15.5 billion bid to acquire shares of satellite TV operator Sky it doesn’t already own. It also cleared the way for a rival $31 billion bid by Comcast for control of Sky.

U.K. Cultural Secretary Matt Hancock told Parliament the Comcast offer did not raise public interest concerns, adding, “I can confirm today that I will not be issuing an intervention notice.”

Comcast, like Fox, has agreed to guarantee editorial independence for Sky News with a 1o-year financial support commitment.

Regardless of whether Fox outbids Comcast for Sky, it has agreed to sell 20th Century Fox Film — which includes Sky — to The Walt Disney Co. for $52 billion in a primarily stock transaction. Comcast is contemplating a separate $61 billion cash offer for 20th Century Fox, which also includes 20th Century Fox Home Entertainment.

Fox corporate, which is controlled by Rupert Murdoch and his son Lachlan, issued a statement lauding the U.K. government’s decision.

“[Fox] welcomes today’s announcement by the Secretary of State for Digital, Culture, Media and Sport that … has cleared [our] proposed acquisition of the remaining shares in Sky on broadcasting standards, as recommended by the Competition and Markets Authority (“CMA”),” said the media company.

Sky, in a statement, said the Fox’s decision to support editorial independence for its news division provided a “good starting point” to overcome the adverse public interest effects of the proposed merger.

It also applauded Parliament’s approval of Comcast rival offer.

“The Independent Directors of Sky are mindful of their fiduciary duties and remain focused on maximizing value for Sky shareholders,” said the company.

Netflix Worth More Than Comcast, Disney on Wall Street

Thanks to a record stock price, subscription streaming video behemoth Netflix quietly ended May 23 with a market value exceeding Comcast for the first time.

The same Comcast that owns NBC Universal, DreamWorks Animation and wants to own 20th Century Fox Film and British satellite TV operator Sky.

Netflix ended the day with market capitalization of $149 billion, which bested Comcast’s $147 billion market cap. Netflix opened May 24 up to $151.8 billion, which passed Disney’s $151.7 billion market cap.

With more than 125 million subscribers globally, Netflix continues to grow. The service expects to add 6.2 million subs in the second quarter ending June 30.

The service also continues to expand its creative product with the bow of “Dear White People,” “The Break with Michelle Wolf” on May 27, and announcement of future projects with former President Barack Obama and First Lady Michelle Obama.

The latter drew some pushback on social media, with several subscribers saying on Twitter they would cancel their service, according to Fortune.

Apparently, President Obama’s desire to “cultivate and curate the talented, inspiring, creative voices who are able to promote greater empathy and understanding between peoples and help them share their stories with the entire world,” being an affront to some.

Chief content officer Ted Sarandos said the Obamas are “uniquely positioned to discover and highlight stories of people who make a difference in their communities and strive to change the world for the better.”

And Wall Street agrees — for now.

Comcast Prepping Superior Offer for Fox

The Walt Disney Co. and 21st Century Fox may think they have a $52.4 million merger agreement to split off 20th Century Fox Film locked up, but Comcast is hedging shareholders will follow the money.

Comcast May 23 issued a statement that it is finalizing an all-cash (reportedly $60 billion) offer for Fox that bests Disney’s stock-based offer.

“In view of the recent filings with the U.S. Securities and Exchange Commission by The Walt Disney Company and Twenty-First Century Fox, Inc. in preparation for their upcoming shareholder meetings to consider the acquisition of Fox by Disney, Comcast Corporation confirms that it is considering, and is in advanced stages of preparing, an offer for the businesses that Fox has agreed to sell to Disney (which do not include the Fox News Channel, Fox Business Network, Fox Broadcasting Company and certain other assets),” Comcast said in the statement.

Comcast also has a separate $31 billion offer on the table for British satellite TV operator Sky that trumps Fox’s $15 billion bid for outstanding shares of Sky it doesn’t already own.

“The structure and terms of any offer by Comcast, including with respect to both the spin-off of “New Fox” and the regulatory risk provisions and the related termination fee, would be at least as favorable to Fox shareholders as the Disney offer,” said the cable giant.

Comcast reiterated that no final decision has been made, but that “at this point” the work to finance the all-cash offer and make the key regulatory filings is “well advanced.”

Comcast’s $31 Billion Bid for Sky Receives Regulatory Bump

Comcast’s proposed $31 billion offer for British satellite TV operator Sky isn’t generating any concern from the government’s Secretary of State for Digital, Culture, Media and Sport.

Comcast May 7 formally submitted a counter-offer to 21st Century Fox’s $15 billion bid to acquire shares of Sky it does not already own.

“Having reviewed the relevant evidence available, I can confirm that … I am minded not to issue [regulatory concern] on the basis that the proposed merger does not raise concerns in relation to public interest considerations, which would meet the threshold for intervention,” Mike Hancock said in a statement.

Separately, media reports say Fox will formally ask shareholders to vote in July on The Walt Disney Co.’s $52.4 billion offer for 20th Century Fox Film, which includes 20th Century Fox Home Entertainment.

Comcast reportedly is readying its own bid for Fox assets in June.

In January, the U.K. Competition and Markets Authority issued a report warning Fox’s majority takeover of Sky without concessions would not be in the public’s best interest.

Fox, like Comcast, has vowed to leave Sky News as an autonomous operation with editorial and fiscal freedom in the event of a merger.

The CMA said successful bids by Disney or Comcast of Sky would “significantly weaken” Rupert Murdoch’s tie to Sky – the basis of the regulator’s concerns.

“On the face of it, these concerns would fall away,” the CMA said.

In Digital Age, Comcast is Swinging for the M&A Fence

NEWS ANALYSIS — Comcast still has that Disney itch.

The media giant reportedly is securing upwards of $60 billion in cash financing in an effort to outbid The Walt Disney Co.’s current $52 billion stock offer for 2oth Century Fox Film Corp., which includes movies, TV shows and foreign assets.

The merger & acquisition bid would only be submitted should AT&T’s $84.5 billion acquisition of Time Warner be approved by a federal judge, according to Reuterswhich cited sources familiar with the proceedings. That deal is being opposed in court by the Department of Justice on alleged antitrust issues.

Comcast previously submitted a $30 billion offer for Fox-controlled Sky Plc in the United Kingdom — a bid that trumps Fox’s separate offer for remaining interest in the satellite TV operator, whose business includes operations in Italy and Germany.

Comcast’s legacy cable business is under increasing threat (lost 96,000 video subs in Q1) from over-the-top video behemoths Netflix and Amazon Prime Video, whose global platforms continue to migrate millions of consumers from traditional pay-TV to streaming video.

One way to mitigate the damage is through maximizing economies of scale in content creation and distribution. Comcast assets include NBC Universal, which includes Universal Pictures, and DreamWorks Animation, among many others.

Fox, which is controlled by Rupert Murdoch & his sons, controls the rights to franchises such as “X-Men,” “Fantastic Four,” “Deadpool” and “Avatar,” in addition to “The Simpsons” on TV.

In addition, Comcast, Fox and Disney each own 30% stakes in Hulu (Time Warner owns 10%). Should Comcast prevail acquiring Fox, it would have controlling interest in Hulu, which just topped 20 million subscribers.

Fox subsidiaries are major content suppliers to Hulu, although the platform’s breakout hit, “The Handmaid’s Tale,” is produced by MGM. With Disney eyeing its own branded SVOD service in 2019, controlling interest in Hulu and Hulu Live online TV platform is a pre-requisite.

“We believe this is simply not possible without Comcast’s consent and we see no reason why Comcast would want to enable Disney to have a more successful streaming service that hampers the legacy bundle that is vital to Comcast,” BTIG Research analyst Richard Greenfield wrote in a note last year.

Indeed, Comcast’s rivalry with Disney dates back to 2004 when it made a hostile $54 billion bid for Disney after then-CEO Michael Eisner refused to entertain merger discussions. Comcast later withdrew the offer.

 

Disney, Marvel 4K UHD Movies (Quietly) Accessible on Apple TV

NEWS ANALYSIS – When Apple last year announced it would start selling access to 4K movies (at the same price as HD) on Apple TV through iTunes, Walt Disney Studios Home Entertainment was not among participating studios.

To most observers, the omission was classic Disney, doing its own thing with the arrival of each new digital format and distribution channel. Disney didn’t release its first 4K UHD Blu-ray title until last August with the retail bow of Marvel Studios Guardians of the Galaxy Vol. 2.

Other titles now include Ice Age: Collision CourseCoco, Cars 3, Star Wars: The Last Jedi, Black Panther, Pirates of the Caribbean: Dead Men Tell No Tales, Thor: Ragnarok and Iron Man Trilogie.

Disney CEO Bob Iger may sit on Apple’s board, and iTunes was the first digital platform (in 2008) to sell Disney/ABC television shows and movies. Yet, Disney 4K UHD movies on Apple TV/iTunes would have to wait.

“Disney’s absence is particularly notable given a longstanding close relationship between the two companies,” reported The Wall Street Journal.

But that could be – slowly – changing.

With Disney relinquishing (some) control in the rebranding of the Movies Anywhere digital platform, retail member Vudu.com (where you actually purchase/rent titles) has now incorporated (per forum.vudu.com) the Apple TV 4K app enabling users a way to watch titles in 4K UHD with HDR.

To be sure, the Vudu app does not afford Apple TV users direct access to buy/rent Disney titles, it does however open the door. If a Vudu subscriber acquires a Disney 4K UHD title from the website, it automatically is stored in the member’s collection. That collection can now be accessed on Apple TV.

All that’s missing are more Disney 4K UHD movies with HDR. The studio in February announced Star Wars: The Last Jedi would be its first 4K UHD Blu-ray with Dolby Vision HDR and Dolby Atmos.